IN FOCUS
by Matthew W. Daus, Esq. President, International Association of Transportation Regulators Distinguished Lecturer, University Transportation Research Center, Region 2 Contact: mdaus@windelsmarx.com • 156 West 56th Street, New York, NY 10019 T. 212.237.1106 • F. 212.262.1215

"APP WARS" IN NEW YORK CITY!!!
THE TLC'S E-HAIL PILOT PROGRAM: LITIGATION OVERVIEW & UPDATE

In late 2012, the New York City Taxi & Limousine Commission (the "TLC") proposed rules to allow for smartphone applications to be used with taxicabs - the "E-Hail Rules." However, the proposed E-Hail Rules were heavily protested by the for-hire industry at the November 29, 2012 TLC hearing. As a result of the opposition, the E-Hail Rules were roughly transformed into a pilot program which was proposed and approved by the TLC in a Resolution dated December 13, 2012 called the "E-Hail Program".

The E-Hail Program, among other things, permitted E-Hails to all taxicabs by licensed application providers for a period of one year. The E-Hail Program was scheduled to commence upon the approval of the first application provider, no earlier than February 15, 2013.

In furtherance of the heavy opposition to the E-Hail Program, on February 14, 2013, a coalition of black car and livery companies, collectively the "Petitioners", pursuant to emergency court procedures, requested a temporary restraining order to strike down the E-Hail Program and prohibit the Respondents[1] from implementing and/or going forward with the E-Hail Program.

Of note, the litigation was initially assigned to Justice Arthur Engoron, the same judge who heard and decided the Street Hail Livery Law Suit filed and decided in 2012.[2] After a highly unusual series of twists and turns with several recusals and judge assignment disputes, the case is now firmly before Justice Carol Huff.

SUMMARY OF THE PETITIONERS' ARGUMENTS

Much like the Street Hail Law case, the E-Hail litigation has an overall theme of how the TLC overstepped the bounds of its limited regulatory authority, i.e. this type of industry modification is the task of the New York City Council and not the TLC.

Did the TLC Ignore Historical Context and City Council Authority?

The petitioners argue that the TLC exceeded its authority in passing the E-Hail Program stating it conflicts with both the City Charter and NYC Administrative Code because the TLC has effectively redrawn the bright line industry sectors allowing taxicabs to accept a "pre-arranged" trip, or a form thereof, and to compete with black cars/liveries.

The issue before the court is whether this effective recharacterization of the taxi mode should have been authorized through a legislative act of the New York City Council. In addition, the Petitioners argued that the E-Hail Program authorizes the use of apps to electronically connect taxi drivers and passengers without requiring compliance with statutory licensure requirements that the City Council has imposed.[3]

It is contended that the E-Hail Program directly contravenes these requirements by purporting to "authorize" E-Hail applications ("E-Hail Apps") without requiring taxi drivers or E-Hail application providers ("E-Hail Providers") to obtain communication systems or base station licenses, the only entities authorized to dispatch.

Does the E-Hail Program Fail to Prohibit Discrimination?

The petitioners also argue that the E-Hail Program fails to rectify serious risks of discrimination. In authorizing taxi drivers "not" to "accept" ride requests, either "through active or passive action", the E-Hail Program affords taxi drivers the discretion to accept or reject ride requests, a capacity that was explicitly taken from them by the City and is in conflict with the Administrative Code § 19-507(a)(2). The Petitioners argued that the TLC does not have the authority to override the City Council in affording taxi drivers the discretion to refuse a ride request, whether that request is by "E-Hail" or otherwise.

Did TLC Fail to Follow its Own Rules?

The petitioners contend that the TLC exceeded its authority in passing the E-Hail Program by purporting to waive TLC rules in the guise of a "pilot program" that does not meet the narrow "trial program" standard set forth in the City Charter. The TLC has the authority to implement trial programs specifically "for limited purposes and limited periods of time" and such "pilot programs" may depart from the requirements otherwise established for licensed vehicles.

However, petitioners allege that the E-Hail Program is not limited in scope. It is open to all 13,237 taxis and 47,000 taxi drivers, and is only nominally limited in time, one year. The Petitioners quoted TLC Commissioner Nora Marino who said, in support of her abstention from the E-Hail Program vote, "like a marriage," it will be "a lot easier to get into than out of."

Did TLC Make Procedural Errors Excluding Public Input and Process?

The Petitioners argue that the E-Hail Program is procedurally invalid because it fails to comply with the NYC Administrative Procedure Act ("CAPA") Rulemaking Procedures. Because the E-Hail Program is intended to apply to all taxicab drivers and passengers "equally and without exception," the E-Hail Program falls within the definition of a "rule" and must follow notice and comment requirements.

The number of participants in the Program is not limited, nevertheless, the petitioners allege that the TLC rushed the "pilot program" through without notice and without opportunity for public review. Additionally, the petitioners claim the TLC failed to conduct an environmental review of any potential significant adverse impact under the State Environmental Quality Review Act ("SEQRA") and the City Environmental Quality Review ("CEQR") as a "triggering action" affecting traffic congestion and safety.

Does the E-Hail Program Disparately Impact the Elderly?

The petitioners argue that the E-Hail Program will disparately impact the elderly, in violation of NYC Human Rights Law. Petitioners claim that individuals over the age of 65 and older will be "disparately impacted" in a significant way, as the number of smartphone owners over the age of 65 is very small, 11% own smartphones over 65.

The anticipated saturation of smartphones to find taxis -- "as physical hails are crowded out" by virtual hails in competition for a fixed supply of available taxis -- may force senior citizens to literally and figuratively "wait in the cold." The TLC acknowledged this problem when testifying before the NYC Council that one "need[s] a smartphone to avail of this technology."[4]

Are the Petitioners Going to be Irreparably Harmed?

In order to be granted a stay and preliminary injunction halting the Respondents' implementation of the E-Hail Program, the Petitioners are required to show irreparable harm such that the damage cannot be remedied by money damages at a later date. The Petitioners set forth the following arguments as to why Petitioners must be granted immediate relief and/or an expedited court calendar as the E-Hail Program will:

1. inflict irreparable injuries on Petitioners and the public by dismantling the established regulatory structure;
   
   
   
2. wreak unquantifiable economic havoc on black car and livery bases and their drivers as customers switch to taxis for pre-arranged pick-ups;
   
   
   
3. facilitate the potential for pervasive discrimination by taxi drivers who will be able to use "e-hail" calls as a pretext to bypass or refuse riders;
   
   
   
4. deprive the elderly of a basic transportation resource that is critical for their quality of life; and
   
   
   
5. cause immediate and significant adverse environmental impacts that the City has not even attempted to address.
   

SUMMARY OF THE CITY'S REBUTTAL

Because the Petitioners filed for immediate relief, the Respondents, TLC and the City of New York, were able to present oral arguments in defense of the TLC. In response to these arguments, the City’s attorney first stated that there would be no irreparable harm as the TLC was not prepared to move forward and "go live" or approve any E-Hail Apps.

She noted to the Petitioners that only two applicants have made it through stage one as of February 14th, and both are required to undergo application and security testing and a live demonstration. As such, no applications were anticipated to be approved at the time thus delaying any potential irreparable harm. At the first court appearance, upon questioning from Justice Engoron, the City Attorney admitted that the City is amenable to agree to delay the E-Hail Program approvals until at least the next court appearance, and the parties agreed to do so.

In its reply brief filed with the Court on February 22, 2013, the City countered that the New York City Charter and the TLC Rules of the City authorize the TLC to adopt resolutions approving pilot programs that encourage experimentation and innovation into different modes of transportation service and operation. Toward that end, TLC has proposed the E-Hail Pilot Program in an attempt to experiment with a newly available technology. The pilot program would allow passengers to electronically hail a taxicab and pay for taxi service using an electronic device.[5]

The City argued that pilot programs were explicitly authorized by the City Charter and, to the extent that TLC temporarily suspended some of its regulations governing taxi drivers and taxi vehicles to effectuate the Pilot Program, the TLC was completely authorized to do so.[6] Also, the City responded that Petitioners' argument that the E-Hail Program does not constitute a proper pilot program insofar as it is outside the scope of the City Charter is entirely without basis. Since a pilot is for the purpose of experimentation, the City argued it is meant for precisely the type of program at issue with the E-Hail Program.

Third, the City argued that TLC complied with its rules pertaining to the adoption of a pilot program in creating the E-Hail Program. The City claims that any arguably minor transgression from said rules was cured by the technical amendments passed by the Commissioners at the public meeting on February 21, 2013 and, thus, Petitioners' claims are moot.

Fourth, the City argued that the petitioners are mistaken that the current regulatory structure does not allow medallion taxicabs to pick up passengers by prearrangement. The City contends that the livery/black car limousine industry does not hold a monopoly on prearranged transportation for hire and the Petitioners are mistaken in asserting that medallion taxis are limited to accepting street hails only. The City stated that this is a fundamental misreading of the laws by the Petitioners.[7]

Lastly, the City argued that, because the E-Hail Program is a properly created pilot program, the requirements in CAPA, SEQRA, CEQR, and New York City Human Rights Law do not apply. In any event, the City claims that the Petitioners lack standing to bring a claim pursuant to SEQRA and CEQR.

REASSIGNMENT, RECUSALS, AND A RESTRAINING ORDER

While these substantive arguments were being made in the briefs there was a great deal of activity in the past few weeks related to the assignment of the judge as well as the intervention of interested parties and elected officials.

On Friday, February 15, 2013, the day after the case was filed, the City's Corporation Counsel, Michael Cardozo, wrote to Justice Sherry Klein Heitler, Administrative Judge for Civil Matters, First Judicial District, and questioned the assignment of this case to Justice Arthur F. Engoron. The City accused the Petitioners of forum shopping, and disagreed that the E-Hail matter is "related" to the Street Hail Livery Litigation cases which are currently on appeal.[8] On February 20, 2013 Justice Heitler determined that this matter should be randomly assigned and ordered that the court clerk randomly assign the matter to another Justice of the Supreme Court in New York County.

On February 26, 2013, the case was reassigned to Justice Shlomo Hagler. On the same day, the Metropolitan Taxi Board of Trade ("MTBOT") filed a motion to intervene in the case on the City’s side. On Wednesday, February 27, 2013, Justice Hagler decided to retain the case, denied the Petitioners’ motion to transfer the case back to Justice Engoron, and set the case for a hearing on Thursday, March 7, 2013.

The City stipulated to not implement the program until the hearing on March 7, 2013 so Judge Hagler did not need to decide whether to enjoin the E-Hail Program. On Tuesday, March 5, 2012, Justice Hagler recused himself without any explanation and returned the file to the court clerk to be randomly assigned to a new judge. The case was then reassigned to Justice Donna Mills and a hearing was scheduled for March 7, 2013.

On Thursday, March 7, 2013 at 10:00 a.m. counsel for the Petitioners, Respondents, the MTBOT, members of the press and yours truly were in attendance for the scheduled hearing before Justice Mills. However, Justice Mills recused herself without ever appearing in the courtroom to explain why, and the matter again was returned to the court clerk for random reassignment.

Later that morning, the matter was reassigned to the Honorable Justice Manuel Mendez, who, without holding any hearing on the matter, quickly recused himself when he believed that he had a conflict because he had represented members of the black car and livery industry while in private practice.

The matter was reassigned to Justice Carol Huff in the early afternoon. Judge Huff held a brief hearing on the matter and listened to the arguments put forward by both sides. Unlike the two prior court appearances, the City indicated to Judge Huff that the TLC was ready to "go live" with the E-Hail Program thereby necessitating the Petitioners to proceed with their application for a Temporary Restraining Order there on the spot.

After hearing the oral argument and reviewing the papers, Justice Huff granted the Temporary Restraining Order (the "TRO") to the Petitioners pending a full hearing on the matter. As a result, the TLC and all persons acting in concert with them or on their behalf are temporarily restrained and ordered to refrain from taking any action to implement the TLC's E-Hail Program. Doing otherwise could lead to the City being held in contempt of court.

In the interim, City Council Member Ydanis Rodriquez and New York State Assembly Member Dan Quart each filed separate motions with the court for order granting leave to file amicus briefs, or friend of the court briefs, in these proceedings in support of the black car and livery companies.

Council Member Rodriguez has argued, inter alia, that the TLC ignored the City Council's authority and blurs the distinctions in the transportation industry sectors in its actions to implement the E-Hail Program. Assembly Member Quart argued that the E-Hail Program raises traffic safety concerns, and facilitates profiling and discrimination against the elderly and disabled.

Justice Huff scheduled the full hearing on the merits for 11:00 am on Tuesday, March 19, 2013. Thus far, the E-Hail litigation has created passionate advocacy, raised substantive and procedural questions, and presented a highly unusual situation with five judges (and Judge Heitler) having a role in the matter in just the first few weeks of this litigation.

This litigation is important, not just on the technology front, but also with respect to the long held distinctions between the taxi and for-hire vehicle modes. We will continue to monitor the litigation for our readers and report back on new developments.

1. The "Respondents" or the "City" or the "TLC" shall collectively mean the City of New York, Mayor Bloomberg (in his official capacity), the TLC and Commissioner Yassky (in his official capacity).

2. This matter was deemed a related case to the Street Hail Livery Law case, allowing Petitioners to be heard by the same judge who is intimately familiar with the "bright-line" industry service divisions.

3. See N.Y.C. Admin Code § 19-511(a)).

4. City Council Transportation Committee Meeting, Testimony of David Yassky, April 27, 2011.

5. Respondents' Reply Brief, Page 2, Filed February 22, 2013.

6. See Section 2303(bX9) of the New York City Charter.

7. Respondents' Reply Brief, Pages 3-5.

8. The New York State Court of Appeals agreed to the City's request for a direct appeal of the Street Hail Livery Law case from the trial court, and the oral argument is scheduled for April 24, 2013.
   

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